AMBIGUITY SURROUNDS MCC

Foreign minister Pradeep Kumar Gyawali had a telephone conversation with his US counterpart Mike Pompeo on June 24 regarding the recent developments in executing the Millennium Challenge Compact, an agreement between two countries to mobilise $500 million grant in execution of 312 km long-high capacity electricity transmission line and road upgradation projects offered by the United States through the Millennium Challenge Corporation (MCC). The government is prepared to take forward the projects, however one critical element needs to be completed by Nepal to kick start the projects which is the parliamentary ratification of the aforementioned agreement which has been in limbo since last year. Against this backdrop, Foreign Minister Gyawali’s telephone conversation with his American counterpart was focused on expressing the government’s strong commitment for the ratification of the Millennium Challenge Compact in the next session of the parliament. Though there is no defined cut-off date or deadline in the agreement for its approval by the parliament, it is reported that the government has corresponded with MCC stating that the compact may receive parliamentary approval by the end of June 2020. In this respect, the Millennium Challenge Account (MCA) Nepal - a development committee formed under the Ministry of Finance to execute the MCC assisted projects - has set the date of project commencement from the new fiscal year, July 16, 2020. However it is at standstill as the parliament has yet to endorse the agreement signed with the United States. The projects going to be executed under the grant assistance of MCC have a five year schedule for completion. Once the clock of project execution starts ticking, it is mandatory that they are completed within five years; if not the money will go back to the United States. As the parliamentary approval remains in limbo, the government has informed the MCC that the government might be able to abide all the preconditions to take forward the project after endorsement of the compact in the winter session. The Millennium Challenge Compact demands certain preconditions before moving ahead to project implementation; and parliamentary ratification of the Compact is one of them. The MCA Nepal led by the Secretary of the Ministry of Finance has informed that four out of six preconditions to kick-start the projects have already been completed. As per the agreement, the government has declared the projects as National Pride Projects. The Electricity Regulatory Commission has been formed as a regulator of the energy sector. Similarly, Nepal and Indian governments are agreed in terms and conditions for establishing of the Butwal-Gorakhpur cross border transmission line. The government has already signed the project implementation agreement (PIA) with MCC to implement the projects. However, with parliamentary ratification pending, it is hindering the executing agency from moving forward. Khadga Bahadur Bisht, Executive Director of the MCA Nepal has said that land acquisition and right of way clearance related works could be done simultaneously along with the process to award contract through open competitive bidding. “Projects are in ‘ready to implement stage’,” said Bisht.

Divided Opinions

The conflict within the ruling party has been creating obstruction to mobilise the largest ever single grant assistance. The ruling party fiasco and the divided opinions of senior leaders of Nepal Communist Party (NCP) keeps puzzling the nation. The NCP had formed a committee led by former Prime Minister Jhalanath Khanal comprising of NCP leaders Bhim Rawal and Pradeep Kumar Gyawali (incumbent foreign minister) to make its common stance on MCC grant. The committee has submitted its initial report to the party chairmen duo KP Sharma Oli and Prachanda in the third week of February, and exactly after a month could not accommodate the view of one of its member, Pradeep Kumar Gywali. Gyawali has written a note of dissent expressing dissatisfaction in the interpretation of the agreement presented in the report. The report has suggested revision of the Compact and other subordinate agreements with the Ministry of Finance. The Khanal-led committee has warned that the government must ensure that the grant assistance does not have hidden security interests citing that the US government has brought such assistance under its security umbrella called Indo-Pacific Strategy (IPS). The report has also made objection on the clause of agreement which says the Compact will prevail even if it contradicts with any national laws. This could mean that the country will lose its sovereignty and US government laws will prevail in Nepal if the agreement is ratified from the parliament without needful revisions. A faction of NCP leaders have used the agreement with MCC as a tool to defame Prime Minister Oli and create pressure on him to step down. However, it is not only Prime Minister Oli, former Prime Ministers Baburam Bhattarai, Pushpa Kamal Dahal ‘Prachanda’, Sushil Koirala, Sher Bahadur Deuba who have also given due priority to take forward the assistance at different times during their tenure. The Compact agreement was signed between former Finance Minister Gyanendra Bahadur Karki and Acting CEO of the MCC Jonathan Nash, on September 12, 2017 in Washington DC. According to related government officials, it is not easy to revise the Compact as recommended by the Khanal-led committee report. ‘Chances of revisions are slim. Nepal should either scrap the deal or take it forward as per the agreement signed earlier,’ a high-level source at the Ministry of Finance stated. The government has also included MCC projects in the fiscal budget 2020-21. The fiscal budget 2020-21 has clearly stated that the installation of 400kv Lapsiphedi- Ratamate (Nuwakot)-Damauli-Butwal transmission line will be initiated. Addressing the parliament, PM KP Sharma Oli has informed repeatedly that the government has registered the Compact for parliamentary proceedings. Finance Minister Dr. Yubaraj Khatiwada had registered the Compact in the parliament in July 2019. Finance Minister Khatiwada faced criticism from leaders of NCP for incorporating the aforesaid transmission line project in the fiscal budget 200-21. However, experts have said that the sponsored negative publicity on MCC grants could be suicidal if the US government pulls back the proposed assistance with long term impact in foreign assistance mobilisation, trade, investment and other cooperation from the US and her allies. “The key objective of the MCC sponsored projects globally is to create an impact in the economy and people’s lives addressing the key constraints that are hindering growth,” said Biswo Poudel, an economist, who was involved in the phase of developing projects identifying the key-constraints of Nepal’s economic growth, “These projects are tailor made to address the major constraints of the cross border energy trade as Nepal has high potential to export its clean, green and renewable source of energy to India and regional markets.” Nepal government is also going to inject $130 million as counterpart fund to execute 312 km long 400kv transmission line with cross border electricity trade infrastructures and 99 km road upgradation.

Parliamentary discussion on hold

The grant assistance offered by the MCC is probably the most debated aid in the country. However, Nepal’s parliament has not yet discussed this issue. Though the government has registered the Compact last year in the parliament, the speaker of the lower house has yet to bring it to the parliamentary proceedings for debate and decision. A greater degree of the reluctance shown by the speaker to bring it to the parliamentary proceedings is mysterious in itself. As per a close aide of the Speaker Agni Prasad Sapkota, he is waiting for a common stance of the party chairmen duo Oli and Prachanda.

Once the clock of project execution starts ticking, it is mandatory that they are completed within five years; if not the money will go back to the United States.

The issue of the Compact should have been discussed in the parliament as the matter is already in the parliament’s domain. The speaker is buying time and doing his best to avoid the discussion in the parliament until he gets a signal from the chairmen duo. Prime Minister Oli has openly expressed his desire for the ratification of the agreement, however the Speaker might be seen waiting for a signal from Prachanda as he was earlier associated with Prachanda’s party. “It is truly a undemocratic way to avoid the discussion in the parliament as the Compact is already in the domain of the parliament,” said Semanta Dahal, who has expertise in contract enforcement, “This is in fact at the discretion of the parliament whether to endorse the agreement or not.” The current wrangle without bringing the document for the discussion has raised lots of question on the intent of the ruling party leaders. Debates in the public forum outside the parliament in media, among civil society, private sector and other actors of the society is good; but avoiding parliamentary discussion is an undemocratic way, shares Dahal.

Conspiracy theories abound

Many believe that the United States and China’s rivalry is to contain each other in there sphere of influence. This can be witnessed in the widespread negative publicity of the MCC across the country, and the divided opinions among experts. Conspiracies have been injected among the ruling party leaders as follows: (a) the US law will prevail in Nepal after ratification of Compact; (b) this assistance will block cross border railway project with China and other BRI (Belt and Road Initiative) projects; (c) the US will send military force in Nepal on the basis of this agreement as the support is going to be extended from the security interest; (d) India’s prior consent is a must to mobilise the assistance; (e) the fund spent in execution of projects from the MCC grant is beyond the right to audit from the supreme audit institution in Nepal and so on. “It is most easy way to inject conspiracies in the mindset of Nepalis as they’ve repeatedly witnessed weak negotiations from Nepali leaders mainly while dealing with India in the past,” said Dr. Bishwambhar Pyakuryal, a seasoned economist and diplomat, “As a result there is this impression among the public that political leaders could do anything for their benefit and the forces involved in negative publicity exploiting the sentiment of the people.” However, it is duty of the government to explain and make people aware to counter this negative publicity, states Pyakuryal. “Repeat a lie often enough and it becomes the truth”, citing this quote of Joseph Goebbels, who was the propaganda minister of the Adolf Hitler’s government, Pyakuryal said that if the government did not make aware the people with the truth, those involved in negative publicity will repeat a lie often and try to establish it as truth. The China conspiracy factor further escalates as Chairman of NCP, Prachanda gave a statement just few weeks back, after a virtual meeting with the leaders of Chinese Communist Party (CCP) that Nepal will not accept any assistance that has security interest issues. He has not openly mentioned the particular assistance but everyone can easily deduce the implied meaning of his statement.

Reality check

The US congress has prevented military activities in MCC assisted projects, they can’t conduct military activities in MCC assisted projects. It is not clear whether the assistance is under the Indo-Pacific Strategy (IPS) or not, though IPS is not only a military/security cooperation but also economic cooperation. “If the United States declares all the overseas development assistance are under IPS, will Nepal accept the USAID assistance or not,” questions economist Biswo Poudel, adding, ‘We should not exaggerate the issue without knowing things properly and mess up the geopolitics triggering irrelevant issues or issues that are not of concern to us.” As we are going to develop the cross border transmission line, it is common practice that we must take the consent of the latter, according to Poudel. Earlier too, Nepal had executed Dhalkebar-Muzaffarpur cross border transmission line under the World Bank’s support taking consent of the Indian government. In addition to the regular development cooperation mobilisation, new practice initiated to mobilise MCC’s grant assistance is the requirement of parliamentary ratification. It is because the projects must be executed within five years, that’s why the MCC has sought the national commitment to complete the projects on time. According to Rajeev Dahal, an expert of International Law, the Compact will prevail if any national law contradicts with the agreement. “It is due to the chances in change in law in the future that could create obstruction in execution of the project which has a strict deadline of five years,” said Dahal, adding “This is the standard template of the Vienna Convention. International treaties prevail when it contradicts with the national laws and Nepal has been practicing this since long.” Other countries have also endorsed the Compact from the parliament as more than 30 countries have received Compact funding so far. Nepal was selected in the threshold program in 2011 and it has fulfilled various criteria like rule of law, human rights, girl’s enrollment in school education, macroeconomic stability among others to be selected in the Compact program of MCC, according to Dr. Shankar Sharma, who served as ambassador of Nepal to the US and played a critical role in Nepal’s selection for the Compact program, “We should move ahead towards executing projects without any dilemma because these projects are tailor-made in the national interest of Nepal,” he said. The supreme audit institution will most definitely audit the expenses of the projects, as per MCA Nepal officials. If Nepal moves to the extreme condition of compelling the US to pullback the aid, Nepal will have no ground to seek favour from the super power and worlds’ largest economy for development and strengthening democratic institution, according to experts, “The United States is the first donor for Nepal and both countries share 70 years of cordial diplomatic relations.” Nepal has been practicing democracy, individual freedom and rule of law as its core values which are supported globally by the United States. Experts have dismissed the controversies over the MCC grant assistance, the ball is in the court of Nepal’s parliament and we’ve to wait for its decision.